Getting the Most Out of Your Team

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As companies depend more and more on teams to accomplish key tasks, optimizing each member’s performance becomes a critical challenge. Team members with weak skills can compromise overall productivity or place unfair burdens on high performers, breeding hostility and resentment.

So what can managers do to improve the performance of less-skilled team members? For one thing, they must instill in them not only the desire to improve but also the belief that they can. Furthermore, managers must find ways to increase the likelihood that people with greater skills will help their teammates become more proficient. One practical way to promote both goals is through the design of team compensation structures.

To test how pay schemes affect the ability gap in teams, I conducted a study of 100 participants in an interactive simulation exercise called Bolo, which has been used by U.S. Army Research Institute psychologists, among others, to study collaboration and team behavior patterns. In this study, the participants were separated into 35 three- or four-member teams, each of which was pitted against a computer-guided enemy. Each team operated under one of five different compensation structures, but all had the same goal: to beat the enemy by capturing as many refueling bases as possible. The game provided opportunities for team members to both co-operate with and compete against one another. For example, participants could type secret or open messages to some or all of their teammates. Although the simulation did not re-create a management setting per se, it did involve many of the conditions that characterize one: dispersed information, time pressures, easily evaluated performance, and the need for collaboration.

The five compensation structures I tested were pay equality (each member of the team received the same pay), pay equity (each member was compensated according to individual performance), and three hybrid models that borrowed elements from both the equality and equity approaches. The first hybrid scheme involved a group threshold: After the team as a whole reached a certain target, members’ pay rates rose relative to their individual performance. The second hybrid scheme involved an individual threshold: Once every member of the team hit an established target, pay rates for each would rise according to their individual performance. The third scheme involved a relative ratio: Team members were paid for individual performance, but once the highest paid earned twice as much as the lowest paid, some of the high performers’ subsequent earnings would be transferred to the low performers to reduce the gap.

The hybrid schemes proved to be more effective than the pure pay equity and equality structures at encouraging certain behaviors that could help maximize a team’s performance. The two threshold schemes were better at keeping high performers motivated than the equality scheme and were better than the equity scheme at encouraging high performers to teach and share information with less-gifted performers. (While the group threshold scheme was most effective at encouraging high performers to share knowledge, the individual threshold scheme had the added benefit of generating a strong drive among low performers to improve.) The ratio scheme was the least effective of the hybrids, most likely because it placed a cap on performance rewards and made teammates constantly concerned about their performance relative to one another. Consequently, intense competition occurred under this scheme, and teammates often stole resources or withheld information.

The hybrid compensation schemes I’ve described make sense in certain situations: when a team’s work results in a quantifiable, tangible outcome; when members’ roles are not highly differentiated, so it’s easy to compare individual performance levels; when high-skilled workers cannot simply carry the rest of the team; and when there is enough time for highly skilled members to teach their less-skilled counterparts. In the right situation, such schemes can simultaneously encourage low-performing team members to improve their skills and encourage more highly skilled members to help them in this effort, thereby reaping the benefits of two fundamentally different approaches to structuring compensation—equality and equity.

Nancy Katz is an assistant professor in the Kennedy School of Government at Harvard University in Cambridge, Massachusetts.

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